Paying for college can be a challenge for many students and their parents, but federal student loans can help cover the cost. These loans must be paid back over time, so students should consider carefully whether they truly need one before applying. There are four types of federal student loans available, each tailored to people in different circumstances.
Federal Perkins Loans
Federal Perkins loans are available for undergraduate and graduate study as well as for students pursuing a professional degree. Both part-time and full-time students may apply for federal Perkins loans. They are guaranteed by the U.S. Department of Education and disbursed by the student's college or university. A federal Perkins loan has a fixed interest rate. Eligibility is determined by the student's level of need, the school's funding level and when the student applies. The student must pay back the federal Perkins loan to the school over the course of ten years.
Stafford Loans
Stafford loans are available to students in undergraduate, graduate or professional degree programs who are enrolled as at least a half-time student. They are available directly through the federal government or through third-party lenders. Subsidized Stafford loans are only available to students with financial need. The government pays the interest on subsidized Stafford loans while the student is in school. An unsubsidized Stafford loan builds up interest even while the student is still in college, although payment is deferred until after graduation. Students with unsubsidized Stafford loans must pay the accrued interest on their loans, which is added to the total balance owed each month.
PLUS Loans
PLUS loans are intended as a loan for parents of a dependent undergraduate student who is enrolled in college at least half-time. Graduate and professional degree students can also apply for a PLUS loan themselves. A PLUS loan cannot be for more than the difference between the student's tuition and any other financial aid the student is receiving, so there is no extra money for books or supplies. A PLUS loan may be borrowed directly from the federal government or through an approved private lender. The interest on a PLUS loan accrues from the day the loan is disbursed. Repayment begins while the student is still in college.
Consolidation Loans
A Consolidation loan is a loan that lets students combine two or more federal student loans into one larger loan with a lower monthly payment. Consolidation loans are not available for a student's initial education expenses.
